1993-10-05_GENERAL DOCUMENTS - C1981017 (3)

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corporate affiliates and cross-collateralized with their assets. In particular, Sanwa looks to Coal & Coke to pay the undersecured portion of the debt owed by the Debtor. See Section I.D, "Relationships with Secured Lender, " immediately following. D. Relationships with Secured Lenders In 1982, the Debtor and its parent corporation, Mid- Continent Minerals, Inc. , as co-obligors, borrowed $14 million from Continental Illinois National Bank and Trust Company. An additional $38 million was borrowed by Minerals and the Debtor during 1983 through 1986, for a total of $52 .7 million. Substantially all of the loan proceeds were used by the Debtor, for capital improvements, mine development, and financing operating losses. The balance of the Continental Illinois loans, with interest, eventually grew to $60. 9 million. The loans were secured by consensual liens on substantially all of the real and personal property of the Debtor. In 1988, the Debtor and Minerals began work-out negotiations with Continental Illinois ' successor, the FDIC. This eventually resulted in a restructuring, in April 1989, whereby the FDIC wrote off $34 .8 million of debt, Minerals and its subsidiaries paid off $5.7 million of debt, and Sanwa Business Credit Corporation ( "Sanwa" ) acquired the notes and liens of Continental Illinois with respect to the remaining loan amount, $20.4 million. At the time of the restructuring with Sanwa, the surviving debt was apportioned among the Debtor, its corporate parent, and its sister companies. The Debtor had a $1.5 million term loan and a $2 million revolving credit line. Coal & Coke had a $5 million term loan and a $10.8 million revolving credit line. Redstone Properties and Redstone Corporation each had term loans of $500, 000. In addition, Minerals agreed to pay a $2 million loan origination fee. The Debtor guaranteed and cross-collateralized the obligations to Sanwa of the Debtor's parent and sister companies. Similarly, Minerals and its other subsidiaries guaranteed and cross-collateralized the Debtor's obligations to Sanwa. Although the Debtor started the lending relationship with Sanwa with only $1.5 million of debt, it immediately drew down on the revolving credit line for payment of creditors and operating expenses. Additional sums later were borrowed from Sanwa, including a second term loan in November 1989, in the amount of $7 .5 million, and a third term loan in November 1990, in the amount of $2.5 million. By the time that the Debtor filed its bankruptcy case in February 1992, its direct obligations to Sanwa totalled $19.7 million, all of which Sanwa had declared to be in default in C:\HP51\J88\MIDCON\DI5CLO8.8TM October 6, 1993 5